In this post, I’m going to compile five of the most common comments and questions I get from readers, along with my response to them.
A Dire Situation
Help me! My complex financial situation is incredibly dire!
While I’m quite happy to offer suggestions to readers about their finances, I make it clear that I am not a financial advisor. My advice is that which you should expect from a layperson, no different than if you asked a buddy over a beer what he thinks you should do with your finances.
Most of the time, if the situation seems dire and complex, I encourage the person to seek professional assistance – but that often gets a pretty bitter response. I am never going to offer detailed suggestions over email, simply because a single email, no matter how detailed, can ever really make the whole situation clear. If nothing else, I don’t know who you are and whether or not you have the fortitude to actually dig out of the situation.
If you’re truly scared about your situation, the solution will almost never be found in a single email to a personal finance writer. The biggest benefit that I can provide is an ear to listen to your problems – I’m probably not the person to be providing the solution (although I would love to if I could).
I just came into $X. How should I invest it?
The first answer I always have is do you have any high interest debt? If you have any debt above, say, 7%, use this money to pay off that debt.
After that, you need to figure out what your most important goal is. Are you saving for an education? A car? A house? Retirement? Which one of these feels the most pressing in your life right now? For most people, one of those will stand out – for example, right now I’m most worried about our own next car purchase, so my focus would be on saving for a car.
Once you’ve got that figured out, figure out how far off that goal is. If it’s more than ten years, you should probably be putting it into the stock market, preferably in the form of low-cost index funds like what’s offered through Vanguard. If it’s less than ten years but more than one year, I’d shop around for the best long term certificate of deposit rates at various banks. If it’s less than a year, the best place to put it is probably in a high interest online savings account. That’s my rule of thumb suggestion.
Why didn’t you answer that email I sent you two and a half weeks ago?
While I read every email I get, I do receive about 300 messages on an average day. If the email doesn’t seem to need a response (at least to my reading), I usually don’t respond to it. For a while, I used to send out a highly automated “Thank you for writing!” message in response, but I honestly felt like that was more cold and impersonal than not writing back at all. The other option would be to attempt to formulate a real response to all of those messages. With that many messages, let’s say I spent just a minute on each one. Five hours, gone. There’d be no time left to write The Simple Dollar.
That’s not to say I don’t respond to some of the emails – many of you know quite well that I do respond. The challenge for me is dealing with all of those messages and figuring out quickly which ones need a response and which ones do not. If you wanted an answer and didn’t seem to get one from me, mail me again and make the question more clear. It’s quite likely I read your message and didn’t see that you had a question.
Getting Started With Blogging
I’ve just started a blog, or I’m thinking about starting one. You seem to have had success – how can I get started? What do I need to do to be successful?
In terms of the basic mechanics of blogging, your best bet is to bop over to WordPress.org and get a free one to start with. Experiment with it, see what you can learn, and see if it fits you.
Most people, though, aren’t interested in this. They know the mechanics of blogging, but they’re yearning to learn how to take those mechanics and build it into something compelling that others will read. That’s quite a bit trickier. A while back, I laid out everything I know about blogging in a series entitled Building a Better Blog – you can either read the entries individually for free or download the whole thing as a PDF for a small fee.
The biggest piece of advice? Feel free to dabble, but realize that you won’t be a success unless you have a passion about your topic – the kind of passion that will encourage you to write day in and day out for years about that topic. If you can’t even conceive of doing that, you probably won’t make it as a top notch blogger.
ING Direct Versus Other Online Banks
Why do you encourage people to use ING Direct? Online Bank X has a 0.7% higher APY, and Online Bank Y has a 0.5% higher APY! ING is a ripoff!
If you’re looking for a place to just stockpile a liquid cash portion of your portfolio, then by all means you should chase the highest rate. But, with the ongoing rate wars, banks bouncing their rates up and down all the time, and banks appearing and disappearing on a regular basis, it’s basically impossible to make a consistent recommendation of a bank to put your money. If this is what you want, go to Bankrate.com and find the one with the highest rate. In fact, it’s reached a point where people have basically spammed comments on The Simple Dollar talking up their rates that I just delete such comments – informed readers can use Bankrate if they are just hunting for the best rate.
Personally, I feel that focusing on maximizing the rate and jumping back and forth between banks is a waste of time, because virtually all online banks are within a percentage point of each other. Let’s say you’ve got $10,000 in your account and you want the best possible return. Your local bank might offer 1%, while the best rate online varies between 4.1% and 5.1%. Even if you’re in the lowest of the online banks, the cash difference between that and the highest online one is $100 over a year (meanwhile, the mere commitment to online banking over your local bank is going to be at least $310 a year, so the real value move is switching to any online bank). Even if you just spend one hour a month checking rates and moving your money between online accounts, your effective hourly rate is $8 an hour. You’re better off working at McDonalds.
I recommend ING Direct (and I have since the day I started The Simple Dollar) because it’s the online bank that I use. I don’t follow the rate wars – it’s not a productive or valuable use of my time. I simply wanted a bank that was competitive with online rates, but my biggest criteria is usability and customer service. Can I quickly do everything I need to do via their interface? Is their online bill pay service free and sensible? Can I set up sub-accounts to help me partition and manage my savings? If I do have a problem, can I quickly get someone on the phone? Is the bank sturdy, meaning is it backed by a large enough bank that I don’t have to worry about it blowing away in the wind like NetBank? I tried using a number of online banks, but none of them had the service that ING Direct had. That’s what I want from my primary bank, and that’s why I use ING Direct.
Again, if you’re going to chase rates, you’ll likely always find a better one than the bank you’re at, but if you’re trying to choose a full-featured bank that will handle your primary checking and savings while giving you good rates, customer service is going to be the biggest part of the choice. Out of the online banks, none of them touch ING Direct. I’ve never had a problem with them in the years I’ve been using them, and every time I’ve had any question or needed anything from them, I’ve quickly had my answer.